CPP Increase 2025: The Canada Revenue Agency has announced the Canada Pension Plan changes for 2025, where the employee and employer can protect a higher portion of their earnings. Canadian employed, employers, or self-employed people who contribute to the CPP can check the changes here.
CPP Increase 2025
The CPP offers income replacement to the contributors and their families when they retire. The federal government and the local provinces governed the CPP program. The employees and employer contribute to the plan equally, whereas self-employed persons contribute the full rate.
The CRA has been enhancing the Canada Pension Plan since 2019 to ensure that today’s contributors have financial stability and higher benefits in the future, such as post-retirement benefits, survivor’s pensions, etc. The small increase each year lets people contribute more and save more for future pensions. The plan is applicable for Canadian workers except for people working in Quebec.
Under the CPP enhancement, the contributors will make additional contributions to CPP2 starting in 2024-202. Now that the government has announced the CPP changes for 2025, where the contribution rates remain the same for employees, employers, and self-employed individuals, however, the hike is seen in YMPE.
The first CPP contribution component is hiked to $71,300, whereas the maximum earning for the CPP 2 (additional contribution) is $82,200.
CPP Contributions Rates 2025
Canadians contribute to CPP when they are over the age of 18, working in Canada, and annually earn more than $3,500, however, less than the annual limit. The agency adjusts the annual limit every year to ensure it matches with wage changes. Since 2019, the agency has set two bases apart from the original base – the first additional component ( 2019- 2023) and the Second additional component (2024-25).
For this year’s maximum pensionable earnings is $71,300 first earning ceiling (2019-2023) and $81200 for the second earning ceiling. The contribution rates gradually increase in the first additional component ranging between 4.95% to 5.95%.
The 2023-24 contribution rate was 5.95% which will remain the same for employees and employers in 2024.25; and 11.95 for self-employed.
- CPP1 maximum earning: $71,300 from $68,500 in 2024
- CPP2 maximum earning: $81,200 from $73,300
- CPP rate: 5.95% on CPP (first component) and 4% on the second component
- The basic exemption amount for a year on which the CPP contribution: is $3,500
What’s the CPP increase contribution?
The Canadian workers contributing to the CPP can calculate their contribution based on their income. The agency sets the earnings ceiling each January based on the average increase in wages in Canada. The additional component will not replace the original earning limit ($71,300).
The employer and employee make equal contributions (5.955) for each and 11.9% for self-employed, so the maximum contribution for the employees and employers in 2025 will be $4034.10. Whereas for self-employed persons, it will be $8068.20.
People earning more than $71,300 but below $81,200 will contribute to the CPP based on the second additional component (CPP 2). People’s contributions for a long time will be eligible for higher pension and other retirement benefits.
- CPP maximum contributions for employee and employer: $4034.10
- CPP maximum contributions for self-employed: $8068.20
CPP Second Additional Component Contributions 2025
The second additional component of CPP earning income is an increase of 14% in 2025, which means people with higher incomes between $71,300 and $81,200 will contribute based on this component.
The CPP2 contribution rate for employer and employee equally is 4%, whereas 8% for self-employed individuals. So, the maximum contribution for a self-employed person in CPP2 is $792, whereas the employer and employee contributing equally can contribute up to $396 each.
Employers can deduct their CPP contributions from their taxes and reduce their tax bill, whereas employees and self-employed persons may qualify for the tax deductions, so if you wish to know more about the tax deductions you can check the CRA website or inquire about this to CRA.
Impact of CPP increase 2025
With yearly CPP enhancement, the contributor employee, employer, and self-employed will be impacted in the following ways:
- The employees who reach retirement age in the next 40 years will be able to get 50% more benefit income in the future. The employees with income earning higher than the first ceiling will contribute less than the original CPP, saving their income.
- The Self-employed individuals contributing to the CPP will get 50% more CPP benefits in retirement after 40 years.
- The enhancement will increase the Disability pension based on how long you have contributed to CPP since 2019.
- The CPP survivor pension would also increase based on how long your deceased spouse or common-law partner has contributed to CPP since 2019.
- With CPP enhancement, in 2025 and the year afterward the CPP2 earning threshold will increase by 14%, so many workers can contribute for their secure retirement.
The Canada Revenue Agency has announced the earning ceiling for 2025 for the original CPP and the additional component starting from 2024 for high-income earners to contribute towards their pension plan to have a financially stable life when they retire.
People who wish to contribute to the CPP and participate in the contribution can apply for the plan or check with their employer if they qualify for the plan.
